For years, Tether has been promising that its digital dollar, USDT, would be available on Bitcoin's Lightning Network.
In 2019, Paolo Ardoino, who was then Tether's CTO (he is now the company's CEO), had assured that, no later than next year, USDT would reach the second layer of Bitcoin, but this did not happen.
Now, another company has jumped ahead in the race by issuing a “wrapped” USDT token on Lightning. This is Speed, which is the development team behind Speed Wallet.
The token receives the ticker USDT-L and, for its development and issuance, the Taproot Assets technology was used. It is important to clarify what a wrapped token is. This means that it is not an “official” development of the Tether company. Instead, Speed locks USDT in a multi-signature wallet and then issues USDT-L on the Lightning Network for the same amount.
On Speed's website you can read about the motivations for bringing USDT to the Bitcoin layer 2 network:
“By integrating USDT with the Lightning Network, Speed seeks to expand the utility and adoption of both technologies, providing users with a stable value option for fast, low-fee transactions. Using the Taproot Assets protocol improves privacy and scalability, demonstrating Speed’s commitment to cutting-edge technology in the Bitcoin space.”
Speed, a Bitcoin technology development company.
There, the company clarifies that —in its opinion— the Lightning network is a better option than other cryptocurrency networks for the use of USDT. Among others, the company points out the following as favorable points for the Lightning network:
- Lower and more predictable commissions.
- Greater privacy.
- Greater reliability.
- High scalability.
- A secure environment, guaranteed by Bitcoin technology.
Additionally, as Lightning Labs developer Olaoluwa Osuntokun explains, “a key benefit of issuing stablecoins on Taproot Assets is the built-in transparency.” The specialist details that “newly issued assets generate a proof of issuance that can be used to track total supply and new issuance.”
Currently, USDT-L can be used via the Speed Wallet app (available for iOS, Android and Chrome).
This is what the USDT-L token looks like in Speed Wallet. Source: Speed Wallet.
Speed has developed a bridge to exchange USDT on Ethereum for USDT-L on Lightning Network.
USDT on Bitcoin's Lightning Network was a pending issue
USDT is the main stablecoin on the market worldwide. At the time of this publication, its market capitalization is $114,551,170,628, making it the third most valuable crypto asset, after bitcoin (BTC) and ether (ETH).
Currently, USDT is available on over 10 cryptocurrency networks. Some of them are Tron, Ethereum, BSC, Arbitrum, Avalanche, Optimism, Polygon, and Solana.
In the following graph, taken from the DefiLlama platform, you can see how the USDT circulation is distributed in percentage terms in these networks:
USDT is distributed across more than 10 cryptocurrency networks. Source: DefiLlama.
In 2022, unofficially and experimentally, some USDT transactions were made on the Bitcoin Lightning Network. At that time, the Synonym team reported that they had achieved the feat for the first time.
It is worth noting that USDT was originally issued as a token on the Bitcoin network, through the Omni platform, but the periods of network congestion experienced in 2017 and 2018 motivated Tether to migrate to other networks that ended up being more popular for the use of stablecoins.
The arrival of USDT-L on the Lightning Network represents a significant step forward and, if there is a large demand for the wrapped token, it could even lead Tether to officially issue its crypto asset within Bitcoin again.
